S&P downgrades Baosteel Group

Standard & Poor’s said it lowered Baosteel Group Corp.’s long-term corporate credit rating to BBB+ from A- and long-term Greater China regional scale rating to cnA+ from cnAA.

The outlook is stable.

The agency also downgraded the company’s long-term issue ratings on all of its outstanding senior unsecured notes to BBB+ from A- and long-term Greater China regional scale ratings to cnA+ from cnAA.

The long-term corporate credit rating on Baosteel Resources International Co. Ltd. also was downgraded to BBB from BBB+ and long-term Greater China regional scale rating to cnA from cnA+.

The outlook is stable.

The long-term issue ratings on all the outstanding senior unsecured notes that Baosteel Resources guarantees also was downgraded to BBB from BBB+ and the long-term Greater China regional scale ratings on the notes to cnA from cnA+.

The downgrades reflect the company’s profitability and cash flow leverage to remain weak over the next 12 to 24 months amid tough market conditions, S&P said.

Baosteel Group’s financial performance also was weaker than previously expected because of weak fundamentals in China’s steel industry, leading to deterioration in its stand-alone credit profile, the agency added. The stand-alone rating was lowered to BB+ from BBB-, S&P said.

But the agency said it continues to see a high likelihood that the government of China will provide timely and sufficient extraordinary support to Baosteel Group in the event of financial distress.

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